Savers are facing a battle as the UK’s rate of inflation continues to be higher than the interest rate offered by almost all savings accounts.
The consumer prices index (CPI) rate of inflation was 2.7% in the year to August 2018, according to the Office for National Statistics.
This means that just four savings accounts, five regular savings accounts and two current accounts now beat inflation.
How can I make my cash beat inflation?
Unfortunately while these four accounts beat inflation most require at least a five-year saving commitment.
The best rate on the market comes from Bank of London and the Middle East offering 2.75% EPR (read more about what EPR means here) on a seven year bond. The shortest available account doesn't strictly beat inflation, it matches it at 2.7%. This is the Charter Savings Bank Five Year Fixed Rate Bond.
See the table below for the full list of savings accounts that beat inflation.
|Bank of London and the Middle East Premier Deposit Account - Seven Year Bond||2.75%|
|PCF Bank Seven Year Term Deposit Issue 8||2.75%|
|Bank of London and the Middle East Premier Deposit Account - Five Year Bond||2.7%|
|Charter Savings Bank Five Year Fixed Rate Bond||2.7%|
Regular savers to beat inflation
There are also a number of regular savings accounts which do pay more than inflation. However, all require you to have a current account with the provider.
Consumers with a qualifying current account with First Direct, HSBC, M&S Bank, Nationwide or Santander can access linked regular savings accounts offering 5% interest.
However, these accounts have limits to the amount holders can pay in each month.
|Account||Interest rate (AER)||Savings limits (per month)|
|First Direct Regular Saver||5%||£25 - £300|
|Nationwide Flexclusive Regular Saver||5%||£1 - £250|
|HSBC Regular Saver||5%||£25 - £250|
|M&S Bank Monthly Saver||5%||£25 - £250|
|Santander 123 Regular eSaver||5%||£1 – £200|
Remember these accounts are regular savers – designed for you to drip feed cash into over the course of a year.
Let’s use Nationwide’s 5% regular saver as an example. You can save £250 a month in this account, but you only earn interest while your cash is in the account.
This means your first £250 deposit earns 5% interest for a full 12 months, the second £250 earns it for 11 months and so on.
Current accounts to beat inflation
Current accounts could be a good bet for your savings – especially if you want easy access. However, only two current accounts on the market beat the current rate of inflation. Both also have a minimum monthly pay-ins and other restrictions.
The Nationwide FlexDirect account pays 5% interest on balances up to £2,500 for the first year, but this drops to 1% thereafter. You have to deposit at least £1,000 each month into the account to earn this 5% rate of interest.
Also, the TSB Classic Plus account pays 5% interest on balances up to £1,500. You’ll need to pay in at least £500 a month, register for internet banking, opt-in for online bank statements and paperless correspondence to get this inflation-busting rate.
Use the Moneywise model savings portfolio to beat inflation
Savvy savers can also use the Moneywise model savings portfolio in the fight against inflation.
Created in conjunction with advice site Savings Champion, our two portfolios use high interest current accounts, regular savers and one-year bonds to maximise your total return. The £10,000 portfolio currently returns an inflation-busting 3.31% over a year.
Money is drip fed through the accounts to achieve the best returns. There is some legwork involved in setting up this portfolio, but we think the returns make it worthwhile.
Hi Lobby, the accounts which pay more than inflation are the regular savers from First Direct, HSBC, Lloyds Bank, M&S Bank, Nationwide and Santander. Plus the current accounts from Nationwide, Tesco Bank and TSB – these are strictly current accounts rather than savings accounts but each of them pays a high rate of interest and charges no monthly fee. Although note that the each of these accounts have minimum pay-ins and some other restrictions.
Hi William, I presume you are referring to peer-to-peer investments? I would suggest reading our guide to the risks invovled in peer-to-peer lending and then my investigation into the P2P market from last year, both will give you some information to help make an informed choice on whether this kind of investment is right for you.The most important thing to remember is that these are long-term investments, not savings products, and you do risk losing your cash.
Hi Keith, I'm afraid to say that while you may have a regular saver accepting £500 a month, Nationwide has since lowered that monthly limit to £250 for new account openings.
Hi M, some of the regular saver accounts we have selected can be opened and maintained with deposits of £1 per month. Each of the accounts currently selected do require a linked current account, and these all have minimum pay-ins, but you can usually meet these by moving around your existing cash each month. You can read more on this in our guide to "current account ping pong".